Question

Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $460,000 is estimated to result in $190,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $74,000. The press also requires an initial investment in spare parts inventory of $35,000, along with an additional $3,850 in inventory for each succeeding year of the project. The shop’s tax rate is 25 percent and its discount rate is 8 percent. (MACRS schedule)

Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1